Tesco profits soar to £1.7bn

PROFITS at Tesco surged 22% last year to a record £1.7bn, reflecting strong growth in its core UK supermarkets chain, particularly in non-foods.

The figures, which exclude exceptional items, more than matched the City's high expectations and leave the group on course to push profits within a whisker of £2bn this year, with most analysts forecasting it will make around £1.9bn in the current 12 months. The dividend total is up 10.3% to 6.84p.

Group sales for the 12 months to the end of February rose 18.7% to £33.6bn, of which £26.9bn was earned in the UK, a rise of 16.3%. Like-for-like increase in the core supermarkets chain was 6.7%, including strong volume growth of 6.6%.

'It's the best year I can remember,' said chief executive Sir Terry Leahy, adding that the performance 'demonstrates what a great British success Tesco is at home and abroad'.

Tesco recently raised £1.5bn to fund growth, and there have been some worries that it might be planning a risky overseas takeover. But Leahy reassured the City today, saying: 'There is no big acquisition around the corner.'

Further big gains at home have been made in non-foods - in baby goods, for example, the group now sells more than Boots and Mothercare combined.

Tesco.Com, the home delivery service, increased sales to £577m and profits surged from £12m to £28m. Personal finance was also strong, with profits up from £48m to £80m.

Overseas, expansion continues apace, with sales up 29% to £6.7bn, and profits by 44%, taking them to £306m.

The group plans to open 51 more hypermarkets and 51 other stores overseas this year, while a further 20,000 employes will be added to its worldwide workforce.

Tesco accounts for one in eight pounds spent in all British shops, but Leahy believes there is still plenty of scope for growth.

According to Verdict Research, Britain's shoppers spent a record amount on non-food products at supermarkets last year, and Tesco could overtake Dixons and Marks & Spencer as Britain's biggest non-food retailer within five years.

Shoppers are still in confident mood, Sir Terry said, and there is no reason why the group should not continue to see good growth, although he cautioned it might not match peak levels.